As raging inflation strains relationships, here's how advisors can coach worried clients

Inflation is straining more than our finances. It’s also putting pressure on our relationships.

The consumer price index increased 9.1% from a year earlier in June, a sign that inflation is still running rampant. It’s an anxious time for the U.S. economy, making it even harder to talk with friends and family about money.

A third of Americans said that rising prices have had a negative impact on their relationships, according to a recent survey by the Harris Poll. At home, 53% of couples say inflation is prompting them to discuss money more often with their partners. 

Here is what experts told us about how to talk about money when prices for everything seem to be going nowhere but up.

Focus on Facts
A major complication of discussing inflation is that it can feel nebulous. For one thing, higher prices tend to creep up on consumers incrementally.

“This slow, unnoticeable effect is akin to the proverbial frog in a pot of water that’s slowly heating up,” says Jonathan Shenkman, president of Shenkman Wealth Management in New York. 

Inflation can also vary a lot from consumer to consumer. Even if the headline rate is high, your own personal experience may be different from someone else’s. That’s because the measure used to calculate CPI is based on a weighted average of price changes in a “basket” of consumer goods and services. So a friend who drives to work and must pay high prices for gasoline may be feeling more strain than someone who can walk or take public transportation.

Tax

Talking about inflation raises prices. Here's how financial advisors can address the "I" word

“Inflation psychology” is back, complicating financial planners’ discussions with unnerved retirement savers.

By Lynnley Browning

June 27

That makes breaking our old taboos about not discussing money with friends even more important, says Ben VerWys, founder of Fiduciary Financial Advisors in Grand Rapids, Michigan. He recommends having frank conversations with friends and family about where you might be feeling pressed financially. 

One way that inflation can cause conflicts at home is when a spouse or a child doesn’t seem to register that it’s real. (Or doesn’t want to reckon with it.) In these situations, VerWys recommends focusing on the facts: Encouraging a family member to keep a note on their phone of prices each time they make a regular purchase to see how those prices change over time. 

“You don’t have to start by telling someone to change their spending habits,” says VerWys. “But this might help someone who’s inflation agnostic or inflation unaware start paying attention to prices, and they may naturally start changing their habits.”

‘Teachable Moments’ 
Inflation is at its highest level in four decades. The trouble is that some family members may not remember — or may not have even been born — the last time price spikes were so severe. 

That’s part of the reason why talking about budgetary changes can be so difficult with younger family members. Children often don’t make a household’s major purchases, so they might not be registering the same pressures as their parents. 

“I’ve had success utilizing age-appropriate examples to demonstrate the effects of inflation,” Shenkman said. “For a teenager, as example, this may include discussing how buying the same meal for lunch costs more now, the price of movie tickets has gone up, or the significant jump in new car costs relative to just a few years ago.” 

Talk Openly
Experts agree that the best way to deal with financial stress is to talk about it openly with friends. That’s tricky because talking about money is taboo for many.

It’s the responsibility of both parties — a friend who may be pinched by inflation less, and one who may be more — to clarify if inflation has changed their financial comfort levels, according to VerWys. Shopping trips, nights out, and restaurants that may have once felt affordable to both sides of the friendship may no longer. Asking about affordability, and respecting the answer, is increasingly important. 

“Friendships are never built on money, but they can fall apart because of money,” VerWys said.  “If somebody’s truly a good friend of yours, they don't want to put you in an uncomfortable position.”